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nstructions
Project 2 Group Project Due Week 5
In this group project your team will begin to learn about the elements of strategic planning. Specifically, students will complete an external environmental analysis and an internal environmental analysis. For an organization to do a comprehensive analysis both the external and internal analysis must be completed. The external environment consists of variables that an organization cannot control whereas the internal environment consists of controllable variable. Assessing both the external and internal environments helps develop strategies that create a competitive advantage for an organization. An organization wants to leverage its internal strengths and take advantage of external opportunities.
In this project, your group will complete a SWOT analysis, a PESTLE analysis and a Porter’s Five Forces analysis for BIOTECH. You will then discuss the relationship between these assessment tools and the company’s vision statement and mission statement in developing a strategic plan. Lastly, you will provide a convincing argument as to why the new project meets the strategic plan and why Biotech is well positioned for the future in the nutraceuticals and supplements market.
The instructor will create teams of no more than four team members. If your team has less than four member, it is still possible to complete the project. If for some reason, the members of your group decide to drop the course and you are the only member, you will contact the instructor immediately so that you can be moved to an active group. You may not move to another group because you are unhappy with your team members. You may also not do the project as an individual.
You will act as a self-managed team, which means you are accountable for all of the requirements of the assignment. You team may assign roles and responsibilities. Each member is responsible to meet the requirements of timeline of the project. If a team member does not complete his or her work, it is the responsibility of the other team members to complete that work. If a team does not meet the deadlines for the project, the Late Assignment policy will apply.
At the end of the project, each team member will complete a Peer Evaluation Form. If you fail to complete the form, a zero will be assigned for the grade. Each member should complete the Peer Evaluation Form accurately.
NOTE: All submitted work is to be your original work. You may not use any work from another student, the Internet or an online clearinghouse. You are expected to understand the Academic Dishonesty and Plagiarism Policy, and know that it is your responsibility to learn about instructor and general academic expectations with regard to proper citation of sources as specified in the APA Publication Manual, 6th Ed. (Students are held accountable for in-text citations and an associated reference list only).
Read the following scenario:
Valerie Harper has often been responsible for the development of new products based on what marketing considers high target markets. Valerie has recently been handed the research results on Biotech’s customer demographics. Based on the research, the Marketing Department would like to see Biotech develop products geared toward the baby boomer market.
From reviewing the research, Valerie noted that Biotech has done little development of the over 50 customer demographics. The current Biotech line has a few joint supplement products and vitamins targeted toward this age group but nothing more. Valerie researched the trends and found high blood pressure, Type 2 diabetes and Alzheimer’s/dementia were a few of the major health concerns for the over 50 customers. Further research revealed clinically proven effects of hibiscus tea on reducing blood pressure. This finding led Valerie to consider developing a product that was all-natural, good tasting, and competitive with existing teas. The tea would be pre-made and packaged in paper cartons with coated sealant. The plan is to promote the tea as natural products for green accountability. The tea container would include a straw so potential tooth erosion from the acidic tea could be minimized.
Valerie also thought about other products that might be appealing to baby boomers. She came across several ideas. The first is a protein bar that was made with coconut, dark chocolate, almonds, and blueberries. The bar would contains all-natural products that would increase the protection of brain function through protective antioxidants, thus protecting against dementia and Alzheimer’s. A second bar would contain natural herbs and would be developed with help from a vendor located in India, which helps lower blood sugar in Type 2 diabetes.
Valerie named the test line Boomers Best Bets for the purposes of development. Having come up with samples of the products, costs and overall descriptions of the products, Valerie and the head of marketing were now ready to approach the Strategic Planning Committee with their new product ideas. Valerie put together a team including a person from Marketing, Production, and Quality Control to review the products and decide how to position the products for acceptance by the Strategic Planning Committee.
Instructions
Step 1: Role as a Member of the Pitch Team
Your team is part of Valerie’s Pitch Team and has been tasked with creating PowerPoint presentation that Valerie will use to “pitch” the Boomers Best Bets to the Strategic Planning Committee.
Valerie has given detailed instructions for the PowerPoint presentation. Make sure to follow the instructions. To better prepare you for the tasks at hand, you will:
- Research the nutraceuticals and supplements industry to assess the external environment of the business;
- Complete the internal environmental analysis by looking at the Company Profile;
- Use of the Note Section of PowerPoint to provide the analysis.
For the purpose of this project assume that budget and financial issues can be reasonably met.
Step 2: The PowerPoint Presentation
The PowerPoint presentation must include the following:
- Introduction to the Strategic Planning Committee explaining the purpose of the presentation;
- A SWOT analysis, PESTLE analysis, and Porter’s Five Forces analysis;
- A discussion of the vision and mission statements with an explanation of how the vision and mission of the Biotech works in concert with the SWOT analysis, PESTLE analysis, and Porter’s Five Forces analysis to help develop a strategic plan for the company’s future;
- Convincing arguments as to why:
Boomer’s Best Bets meets the strategic plan suggested by the total analysis;
Biotech has a strong position for a future in the nutraceuticals and supplements market. - Use the Note section to provide a thorough analysis
Step 3: Preparation for the Power Point Presentation
To prepare for creating the PowerPoint presentation, your team will:
- Act as a self-managed group;
- Every member of the team will research the nutraceuticals and supplement market to gain a thorough understanding of what will need to be placed in the presentation;
- Collaborate with your team members to discuss the findings of each person’s research and determine what key information will be part of the presentation;
- Determine the role of each person in the presentation;
- All members of the team are responsible for signing off on the final presentation.
Step 4: Review the Presentation
Read through the slides to ensure all required elements are present. Use the grading rubric to ensure that you gain the most points possible for this assignment.
Proofread the slides for spelling and grammatical issues, and third person writing.
- Read the slides and notes aloud as a first measure;
- Use the spell and grammar check in Word as a second measure;
- Have someone who has excellent English skills to proof the paper;
- Consider submitting the paper to the Effective Writing Center (EWC). The EWC will provide 4-6 areas that may need improvement.
Step 5: Submit the Presentation in the Assignment Folder (The assignment submitted to the Assignment Folder will be considered the student’s final product and therefore ready for grading by the instructor. It is incumbent upon the student to verify the assignment is the correct submission. No exceptions will be considered by the instructor).
How to Set Up the Presentation
Create a PowerPoint Presentation with no more than 15 slides, which includes the title page and reference page.
Use the following resource to learn how to create a PowerPoint presentation:
How to Create a Winning PowerPoint Presentation
Completing the Presentation
- Read the grading rubric for the project. Use the grading rubric while completing the project to ensure all requirements are met that will lead to the highest possible grade.
- Third person writing is required. Third person means that there are no words such as “I, me, my, we, or us” (first person writing), nor is there use of “you or your” (second person writing). If uncertain how to write in the third person, view this link: http://www.quickanddirtytips.com/education/grammar/first-second-and-third-person.
- Contractions are not used in business writing, so do not use them.
- Paraphrase and do not use direct quotation marks. Paraphrase means you do not use more than four consecutive words from a source document, but put a passage from a source document into your own words and attribute the passage to the source document. Not using direct quotation marks means that there should be no passages with quotation marks and instead the source material is paraphrased as stated above. Provide the page or paragraph number when using in-text citations. Note that a reference within a reference list cannot exist without an associated in-text citation and vice versa.
- You may not use books as source material.
- You are expected to use the facts from the case scenario paired with the weekly courses readings to develop the analysis and support the reasoning. The expectation is that you provide a robust use of the course readings. If any material is used from a source document, it must be cited and referenced.
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PRODUCT ELEMENTS AS THE BASIS FOR CONSUMER CHOICE:
THE CASE OF FOOD SUPPLEMENTS
Monika Kavaliauskė
1
, Michail Chavkin
2
, Inga Zaukevičienė
3
,
Roma Bernotavičiūtė
4
, Sigitas Urbonavičius
5
1
Vilnius University, Lithuania, monika.kavaliauske@ef.vu.lt
2
Vilnius University International Business School, Lithuania, mchavkin@gmail.com
3
Vilnius University International Business School, Lithuania, inga.zaukeviciene@gmail.com
4
Vilnius University International Business School, Lithuania, roma_bern@hotmail.com
5
Vilnius University, Lithuania, sigitas.urbonavicius@ef.vu.lt
Abstract
One way of analysing market offers is based on the evaluation of product elements from the position
of potential consumers. Food supplements product category is rather specific and has not been much
researched. Therefore, the objective of the paper is to determine which elements of food supplements are
perceived as more important by the consumers and have the strongest influence on consumer buying
decisions, and what combinations of products elements would be preferable by various consumers segments.
The analysis was based on results of survey that included opinions of 188 participants. Conjoint analysis was
used to determine consumer preferences based on the selected six research variables: brand name, main active
ingredient, frequency of use, country of origin, price and recommendations. Also the gender, age and buying
experience of consumers were considered. The results revealed that internal product elements had the
strongest influence on consumer buying decisions. The most important internal characteristic was the
frequency of use. Price was the most important among the external elements – the lower it was, the more
consumers wanted to buy particular food supplement.
Keywords: consumer behavior, consumer choice, consumer buying decisions, product elements, food
supplements, conjoint analysis.
JEL Classification: M31, M37, I12.
Introduction
Product elements analysis from the position of potential buyers and consumers is widely used in
various instances (markets and product groups), but typically concentrate on high involvement items: durable
goods or at least products that are perceived of relatively high importance to the consumer. Though other
types of products also deserve attention of researchers, low involvement of potential buyers make these
studies more complex or require use of more specific research methods.
As a product category, food supplements are rather specific. From the rational standpoint, they are far
away from being the products of the first necessity. At the same time, emotionally this category is strongly
related with health protection, which increases the importance of these products to some segments of the
market. This controversy makes it difficult to understand which product elements are perceived as more
important, and what their combinations would be suitable to various segments. This served as a background
for the research on importance of the food supplement elements in Lithuanian market. Additionally, it is
necessary to state that the legal definition of food supplements includes very broad set of product types that
are used for fortifying one’s health and can’t be assigned to the category of pharmaceuticals. Thus, the study
is based on the product group that belongs to the food supplements category – i.e. supplements for the eyes.
Therefore, the objective of the paper is to determine which elements of food supplements for the eyes
are perceived as more important by the consumers and have the strongest influence on consumer buying
decisions, and what combinations of products elements would be preferable by various consumers segments.
The research was carried out according to the conceptual model which included internal and external
product elements that influence consumer decisions. The analysis was based on results of survey that
included opinion of 188 participants. The conjoint analysis was used to determine consumer preferences
based on the selected six research variables: brand name, main active ingredient, frequency of use, country of
origin, price and recommendations.
Product elements
Previous consumer buying behavior studies revealed that customers pay attention to many product
characteristics while choosing it, which can differ according the product type. Importance of product
characteristics might differ among different customers, especially when they gain new experience and
knowledge during the time period (Aliman et al., 2007).
http://dx.doi.org/10.5755/j01.em.17.1.2276
mailto:mchavkin@gmail.com
mailto:inga.zaukeviciene@gmail.com
mailto:roma_bern@hotmail.com
http://dx.doi.org/10.5755/j01.em.17.1.2276
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Product characteristics and elements can be classified in several ways; however, often they are divided
into two groups: internal (essential) product characteristics and external (inessential) characteristics
(Northen, 2000; Fandos et al., 2006; Aliman et al., 2007; Veale el al., 2009).
Internal characteristics are the essential, natural product elements, which determine product
functionality and physical appearance (Veale et al., 2009). These characteristics are specific for every
product; also they disappear while consuming the product and cannot be changed without changing the
essence of the product (Fandos et al., 2006). Such orgoleptic characteristics as appearance, color, taste,
smell, can be classified as internal (Northen, 2000; Fandos et al, 2006).
External characteristics are related to the product but are not the part of it. These characteristics can be
changed while not changing the physical product condition. Therefore, price, brand, country of origin,
packaging, recommendations by authorities, suggestions by shop employees can be classified as external
product characteristics (Northen, 2000; Fandos et al., 2006).
It was found that in evaluation of quality of the rationally purchased products (to which food
supplements for the eyes can be assigned) internal product characteristics typically are considered as being
more importante than external ones. However, for the products more related to the image (automobiles,
apparel items, etc.), physical differences cannot be easily evaluated, and therefore external characteristics
become more important (Pecotich et al., 2007).
Familiarity with product category also influences the reliability of product characteristics. Typically,
external characteristics are more important when familiarity is low, while internal characteristics are more
important when knowledge about product is high (Jin el al., 2010).
Brand can be classified as the most important element for consumers to decide whether to buy or not
particular product (Srinivasan et al., 2002; Aliman et al., 2007). Brand is the external product element, which
consumers consider in product evaluation, and especially – when they cannot understand or evaluate internal
product characteristics (Aliman et al., 2007). Strong and well known brand provides customers information
about product quality, visible and invisible product characteristics and might decrease concern during the
buying process (Srinivasan et al., 2002). In addition to this, the more customer is familiar with brand, the less
other external characteristics such as price or country of origin, are considered, because information provided
by the brand becomes more valuable (Pecotich et al., 2007).
Many researchers have determined the positive impact of country of origin to product evaluation and
choice (Hui et al., 2001; Aliman et al., 2007; Veale et al., 2009), however, the level of importance was found
very different. As many researchers determined that internal product characteristics (appearance, colour, taste)
have higher impact for quality evaluation than external characteristics (price, brand, country of origin), it is
obvious that country of origin can make only limited influence on perception of product quality, especially
when customer can evaluate many product elements (Al-Sulatiti et al., 1998). Therefore, customers perceive
country of origin as an important element when: (a) they have information about the product or the information
is less specific and reliable; (b) product is important and expensive, (c) buyers do not understand the product
well enough, or (d) product category is closely related to the country of origin (such as French perfume or
Chinese silk) (Veale et al., 2009). In some instances domestic products are evaluated higher, which might be
influenced by ethnocentrism and higher recognition of local products (Pecotich et al., 2007).
Price is also one of the most important product elements, however, the impact of price is bigger then
there is not much information about the product, as the broader information facilitates decision making
process and decreases the impact of price (Veale et al., 2009). Higher price can be perceived as a signal of
better quality, especially – when the product is very important for the customer, or it is difficult to evaluate
product characteristics. In case of food supplements for the eyes higher price can be perceived as an indicator
that the product will have stronger positive impact on a consumer’s health (Akcura et al., 2004).
Additionally, decision about product choice is influenced by customer personal characteristics;
especially: gender, age, income and buying experience. It was discovered that women and persons with
lower income are more aware about the prices and see them as more important (Rosa-Dı´az, 2004).
Consumer behavior also differs according to the buying frequency of particular product, as the product
choice criteria differs in the process of acquiring experience and expertise (Nisel, 2001). Such customer
characteristics as age, income, social class determine the number of attributes that each segment of customers
evaluates. Typically, when buying novel and high involvement products, younger and higher social class
customers evaluate more attributes than elder ones. Elder consumers, as well as the ones from lower social
groups, typically try to simplify the process by analyzing less product attributes (Schaninger et al., 1981).
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Conceptual Model
The main research variables include the six product elements: brand, main active ingredient, frequency
of usage, country of origin, price and recommendations. According to the analyzed literature, brand, country
of origin, and price are considered as essential product elements, common for every type of product
(including food supplements for the eyes). However, in order to define product-specific external elements,
the series of expert interview were performed. In addition to the known essential product elements, the
experts reported that in case of food supplements for the eyes the most important influencing factors are: the
main active ingredient; convenience of the using, particularly – how many times per day the product has to
be used (frequency of use), manufacturer and recommendations of official institutions (opinion leaders) that
may be found on the product packaging. However, influence of a manufacturer was excluded from the
further research in order to avoid possible overlap with the brand.
Therefore, based on the literature analysis and pilot survey, the research model included two
categories of product elements: internal (essential) characteristics (the main active ingredient, frequency of
use); and external characteristics, such as: price, brand, country of origin, and recommendations of opinion
leaders (Fig. 1).
Figure 1. Research model
Hypotheses
The aim of the research was to evaluate how different product elements influence consumers’ choice
when selecting food supplements for the eyes. Therefore, according analysis of literature, six hypotheses
were developed:
H1: Internal product elements (active ingredient, frequency of usage) have bigger impact on
consumers’ choice of food supplements for the eyes than external product elements (brand, country of origin,
price, and recommendations).
H1a: Internal product elements (active ingredient, frequency of usage) have bigger impact on
consumers that have experience in using food supplements for the eyes than for those who do not have
experience in using food supplements for the eyes.
H1b: External product elements (brand, country of origin, price, and recommendations) have bigger
impact on consumers without experience in using food supplements for the eyes than for those who do have
experience in using food supplements for the eyes.
H2a: Consumers evaluate food supplements for the eyes better when the country of origin is Lithuania
compared to USA or France.
H2b: Consumers evaluate food supplements for the eyes better when the country of origin is USA
compared to France.
H3: Preferences for food supplements for the eyes differs between young and older consumers.
Methodology
The research was carried out according to the conceptual model which included product elements that
influence consumer decisions. Respondents were selected using non probability sampling snowball method.
The questionnaire was hosted on the internet and respondents received a link to it. To determine the required
amount of respondents, the comparable researches that used conjoint analysis were analyzed. It was
determined that average amount of respondents was 167 ( Okechuku, 1994; Saunders et al., 1997; Arora,
2006; Jin et al., 2010; Quester et al., 1998; Kupiec et al., 2001; Hong et al., 1989). The analysis was based
on results of survey that included opinion of 188 participants. The conjoint analysis was used to determine
consumer preferences based on the selected six research variables: brand name (Liuberin, Yourlife,
Akiuvita), main active ingredient (blueberries extract, lutein, vitamins), frequency of use (1, 2 or 3 times a
INTERNAL characteristics:
Main active ingredient
Frequency of use
EXTERNAL characteristics:
Price
Brand
Country of origin
Recommendations of opinion leaders
IMPORTANCE IN PRODUCT SELECTION
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day), country of origin (Lithuania, France, USA), price (33.23, 39.09, 46.48 Lt) and recommendations
(without recommendation; recommendation of Lithuanian oculists association; recommendation of
International oculists association). Also gender, age and buying experience of food supplements consumer
were considered. 18 representative profiles were constructed, having 6 attributes (research variables) with 3
levels each. SPSS program was used for results analysis.
Results
Survey represents opinion of 188 participants, of which 66.5% were women (N=125) and 33.5% were
men (N=63). Two thirds of the respondents (61.7%, N=116) had eyesight malfunctions, whereas only 38.3%
(N=72) stated that they yet do not have any problems with eyesight. The buying experience of food
supplements for the eyes distributed almost equally among respondents, as 48.4% (N=91) of them bought
food supplements for the eyes previously, whereas 51.6% (N=97) did not.
As the aim of the research was to determine the most important elements of food supplements for the
eyes for consumers, the internal and external elements were evaluated. The results revealed that the most
important internal product elements were frequency of use (25.46%) and main active ingredient (21.29%)
(Fig. 2). Whereas, the external product elements were considered as less important: price (17.87%), brand
(13.63%), recommendations (11.40%) and country of origin (10.34%) (Fig. 2).
Figure 2. The importance of food supplements for the eyes elements
According the Stjudent criteria, frequency of use was stastistically more significant than all other
external product elements, similarly as the main active ingredient, which only was not more important than
price. The least significant were country of origin and recommendations (Table 1). These results confirm the
findings of other researchers, which stated that impact of country of origin for the consumer choise is rather
small (Al-Sulaiti et al., 1998; Ettenson et al., 1988). Also the hyphotesis H1 was confirmed, that internal
product elements have greater impact on the consumer choise of food suplements for eyes than the external.
Table 1. The importance of food supplements for the eyes elements (t-test)
Nr. Pair of product elements t df Sig. (2-tailed)
1 Brand – Main active ingredient -2.68 187.00 0.01
2 Brand – Frequency of use -3.87 187.00 0.00
3 Brand – Country of origin 1.56 187.00 0.12
4 Brand – Price -1.72 187.00 0.09
5 Brand – Recommendations 1.11 187.00 0.27
6 Main active ingredient – Frequency of use -1.20 187.00 0.23
7 Main active ingredient – Country of origin 4.30 187.00 0.00
8 Main active ingredient – Price 1.18 187.00 0.24
9 Main active ingredient – Recommendations 4.09 187.00 0.00
10 Frequency of use – Country of origin 5.47 187.00 0.00
11 Frequency of use – Price 2.46 187.00 0.01
12 Frequency of use – Recommendations 5.36 187.00 0.00
13 Country of origin – Price -3.56 187.00 0.00
14 Country of origin – Recommendations -0.63 187.00 0.53
15 Price – Recommendations 3.30 187.00 0,00
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To evaluate hypothesis H3, and determine if age influences consumer preferences in case of food
supplements for the eyes, two age groups were segregated: under 30 years (103 respondents) and over 30
years (85 respondents). The significant difference (t test) was determined in case of main active ingredient
and price (respectively Sig. 0.005 and 0.000). Therefore, H3 was confirmed, as price was more important for
young people, and main active ingredient was more important for older people (Fig. 3a).
a) b)
Figure 3. The importance of food supplements for the eyes elements according a) age; b) buying experience
To evaluate hypothesis H1a and H1b, and determine if buying experience influences consumer
preferences in case of food supplements, two groups were segregated: consumers with food supplements for
the eyes buying experience (91 respondents) and consumers without food supplements for the eyes buying
experience (97 respondents). The significant difference (t test) was determined in case of frequency of use,
country of origin and price (respectively Sig. 0.04, 0.01 and 0.01). Therefore, H1a and H1b were confirmed,
as frequency of use (internal element) was more important for consumers with food supplements for the eyes
buying experience, whereas country of origin and price were more important for consumers without food
supplements for the eyes buying experience (Fig. 3b).
To determine consumer preferences, means of every data group was calculated, and significance of
differences between the means was determined by Student test (t-test).
After the analysis of results it was determined that Liuberin band was preferred the most among the
respondents (Table 2a). Also statistically significant difference was determined only between Liuberin and
two other brands (Table 2b). Therefore, it can stated that customers prefer well know brand even in food
supplements for the eyes category, however, the other global brand YourLife was evaluated the same as the
imaginary brand Akiuvita, specially created for this research.
Table 2. Consumer preferences for brand (t-test)
Brand Mean Standard deviation
Liuberin 0.59 2.894
YourLife -0.23 2.812
Akiuvita -0.36 2.136
Pairs t df Sig. (2-tailed)
Liuberin – YourLife 2.109 187 .036
Liuberin – Akiuvita 3.046 187 .003
YourLife – Akiuvita .430 187 .668
In case of main active ingredient, it was revealed that it is important elements for customers. However,
the extract of blueberries was much more important for the respondents compared to Lutein and vitamins, as
only blueberries showed statistically significant difference (Table 3 a and b).
Table 3. Consumer preferences for main active ingredient (t-test)
Main active ingredient Mean Standard deviation
Blueberries 1.77 3.819
Lutein -.79 3.240
Vitamins -.98 2.781
Pairs t df Sig. (2-tailed)
Blueberries – Lutein 5.374 187 .000
Blueberries – Vitamins 6.441 187 .000
Lutein – Vitamins .561 187 .575
Differences between frequency of food supplements for the eyes use was statically significant for all
three variants, however, usage 1 time a day was considered as advantage, whereas usage 3 times a day was
considered as big disadvantage, while usage 2 time a day being as an intermediate option (Table 4 a, b).
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Table 4. Consumer preferences for frequency of use (t-test)
Frequency of use Mean Standard deviation
1 time a day 3.28 4.034
2 times a day -.82 2.580
3 times a day -2.45 2.799
Pairs t df Sig. (2-tailed)
1 time – 2 times a day 9.117 187 .000
1 time – 3 times a day 12.185 187 .000
2 times – 3 times a day 6.261 187 .000
Survey results revealed that Lithuanians do not prefer any country of origin, as no statically significant
differences were determined (Table 5 a, b). Therefore, hypothesis H2a and H2B were not confirmed.
Table 5. Consumer preferences for country of origin (t-test)
Country of origin Mean Standard deviation
Lithuania -.03 2.636
France .07 2.017
USA -.04 2.104
Pairs t df Sig. (2-tailed)
Lithuania – France -.348 187 .729
Lithuania – USA .034 187 .973
France – USA .506 187 .613
The analysis confirmed that Lithuanians are sensitive to price, as respondents preferred the lowest
price and the differences between different prices were statistically significant (Table 6 a, b).
Table 6. Consumer preferences for price (t-test)
Price Mean Standard deviation
33.23 Lt 1.90 3.400
39.09 Lt -.14 2.287
46.48 Lt -1.77 2.853
Pairs t df Sig. (2-tailed)
33.23 Lt – 39.09 Lt 5.551 187 .000
33.23 Lt – 46.48 Lt 8.609 187 .000
39.09 Lt – 46.48 Lt 5.729 187 .000
Respondents preferred recommendations of Lithuanian oculist association the most, however the
statistical significant difference was determined between all pairs, therefore, product with recommendations
was more attractive for customers than without them (Table 7 a, b).
Table 7. Consumer preferences for recommendations (t-test)
Recommendations Mean Standard deviation
Lithuanian .84 1.976
International .02 2.427
None -.86 2.017
Pairs t df Sig. (2-tailed)
33.23 Lt – 39.09 Lt 2.832 187 .005
33.23 Lt – 46.48 Lt 7.314 187 .000
39.09 Lt – 46.48 Lt 3.006 187 .003
To determine two different customers groups, the cluster analysis was used by “K-means” SPSS
module. Therefore, the prediction was made that two clusters can be segregated, where one cluster prefers
internal product elements, whereas the other cluster prefers external product elements. The start clusters
centers were set at frequency of use as the most important internal element, and price as external product
element. Final result was achieved after 9 iterations with 94 respondents in each cluster.
Figure 4. The importance of food supplement s for the eyes elements according clusters
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Student test confirmed significant difference among all product elements except the brand (sig. 0.000).
Therefore, it can be stated that for the first cluster internal product elements are more important, whereas for
the second cluster – external (Fig. 4). Significant difference was determined between clusters according
buying experience, as customers with buying experience preferred internal product elements (1
st
cluster),
whereas customers without buying experience preferred external product elements (2
nd
cluster) (sig. 0.000).
Also clusters significantly differed according age, as the average age of first cluster was 35.56, whereas the
average age of second cluster was 31.01 (sig. 0.008).
Conclusions
The results revealed that internal product elements of food supplements for the eyes had the strongest
influence on consumer buying decisions. The most important internal characteristic was the frequency of use,
as the fewer times a day the food supplement had to be used, the more attractive it was to consumers. Also the
active ingredient played a significant role, which was especially relevant for the older respondents. However,
most of the consumers were aware only about one type of the three proposed sorts of active ingredients. From
the external elements, price was the most important – the lower it was, the more consumers wanted to buy
particular food supplements for the eyes, which was especially noticeable for the younger respondents. Also it
was revealed that recommendations of opinion leaders were important for consumers, precisely when they were
from local doctors association. However, such products elements as country of origin and brand name were not
important for consumers. In addition to that, it was determined that the brand name awareness of food
supplements for the eyes was very low among consumers in Lithuania.
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Copyright of Economics & Management is the property of Kaunas University of Technology,
Faculty of Economics & Management and its content may not be copied or emailed to
multiple sites or posted to a listserv without the copyright holder’s express written permission.
However, users may print, download, or email articles for individual use.
CUSTOMER LOYALTY | Loyalty Marketing Guide 2013
12 | April 2013 | dmnews.com
By Sarah Shearman
T
oday’s empowered customers are more likely to be loyal to
companies that best understand their needs, goals, and prefer-
ences. Doing so means listening—and listening well means a
comprehensive voice of the customer (VoC) program that’s
closely aligned with marketing.
Additionally, marketers must stay attuned to marketing’s infl uence on
the customer experience; for example, communicating a brand prom-
ise that their company can deliver on or sending relevant, timely of-
fers rather than impersonal blast messages. Customer experience has
a strong correlation to loyalty metrics, such as repurchase intent, rec-
ommendations, and retention, according to Forrester Research. Again,
customer listening is imperative; it will amplify customers’ satisfaction
or dissatisfaction with the customer experience.
“Too often, companies struggle to hear what the customer is actually
saying about them. There is a disconnect between brand perception
and brand promise,” says Larry Freed, CEO of customer experience
analytics fi rm ForeSee. “They need to hear it from the voice of the
customer themselves to build loyalty.”
Some marketers think that a customer loyalty program will suffi ce
in terms of their efforts to help build customer loyalty. However, as
important as those programs are, they’re not enough now that the cus-
tomer journey has become more complex. “I always recommend [that
companies] focus much more on a sustainable and systemic approach,
where you’re actually treating customers in a way that they want to be
loyal, rather than a points program where you’re trapping them in to a
relationship,” says Andrew McInnes, director of product marketing at
customer service and experience solutions fi rm Allegiance.
Freed agrees that marketers must not assume that customers enrolled
in a loyalty rewards program are loyal to their brand over its competi-
tors. “Companies that have loyalty schemes have to look at the new
customers joining and see if they’re making a decision because of your
loyalty scheme, or whether they would have made this decision any-
way,” he says. “Through VoC we can start to fi nd that out.”
Does VoC measure up?
In fact, VoC initiatives can inform whether points programs and other
loyalty marketing efforts are effective. “If you don’t have that measure-
ment it’s almost like running your business with your head in the sand,
because you’re doing these programs and you’re getting false positives
and negatives,” Freed warns.
Of course, the defi nition of loyalty differs for different brands; some
focus more on behavioral loyalty, while others care more about attitu-
dinal loyalty. This means that success measures will vary, as well. For
Julie Kaplan, executive director of marketing and customer experience
at Healthy Directions, a natural health and supplements fi rm, loyalty
Customers are more likely to be loyal to companies
that meet their expectations. Doing so means
aligning the voice of the customer with marketing.
Loyalty Takes
Listening
93%81% 89% 20% 18%
THE NUMBERS | The Customer (Experience) Is King
Source: Oracle Corp.
➜ Customers willing to
pay more for a superior
customer experience
➜ Customers who
switched brands after
a poor customer
experience
➜ Annual percentage
revenue losses due to
poor customer
experiences
➜ Executives who say that
improving the customer
experience is one of their
top-three business priorities
➜ Expected increase in
spending on customer
experience technology
over the next two years
12_Feature_Loyalty_v8.indd 12 3/12/13 4:23:11 PM
dmnews.com | April 2013 | 13
equates to repurchase. “When we mean loyalty it’s not an emotion or
feeling, it really means the customer comes back over and over again,”
Kaplan says. “Loyalty is the biggest revenue driver for our business.”
Healthy Directions started its VoC program two years ago, working
with Allegiance, by emailing a weekly product survey that included Net
Promoter Score questions on likelihood to recommend. A key insight
that arose early on was that customers repurchase from Healthy Direc-
tions if they notice that the products are making a difference to them.
Kaplan notes that rather than having to make major changes to the
company’s marketing, the feedback was “great confirmation” that it
already had the right loyalty strategy in place to generate repurchase.
One of the changes customer feedback catalyzed, however, after the
company discovered that product efficacy drives repurchase and re-
duces return rate, was to make its product labels and inserts easier to
read to ensure that customers know whether to take the supplement at
a certain time, because usage impacts efficacy.
The initiative now includes relationship surveys, touchpoint surveys,
and text analytics, and is moving towards a more automated listening
system. Kaplan says the program has proven to be a “great success” to
the business and has helped her team discover actionable insights that
are used across the business every day.
Based on the marketing initiative’s success, Healthy Directions’ cre-
ative execution of promotions, creative direction, and target market-
ing now reflects specific insights gleaned from customer feedback, both
qualitative and quantitative.
The boon and bane of social listening
Asking customers for feedback like Healthy Directions does is impera-
tive, but “listening” to their input through external channels has become
unavoidable for companies due to the growth of social media. The
rise in popularity of blogs, forums, and social networks provides fertile
ground for marketers to track conversations about their brands and
an opportunity to respond in real time. “The customer is more em-
powered online and can voice their opinion on Facebook or Twitter,
meaning, if they’re frustrated it’s likely that will end up in the public
domain,” says Evan Klein, founder and president at customer feedback
firm Satrix Solutions. “The cost/value equation that measuring VoC in
an online environment creates is also much improved.”
Forrester Research shows that, in 2011, 29% of consumers used a so-
cial channel to complain. The research firm expects this figure to grow
as younger generations age and new generations of highly social con-
sumers enter the marketplace, making VOC in social media of high
importance for marketers.
Listening to complaints and compliments on social media gives
marketers another source of feedback that they can analyze to
give a wider perspective on customer experience. The nature of
social media means feedback can be gained more readily and
from a wider audience, meaning agile companies can respond
to it promptly, which ultimately drives loyalty.
It’s possible to take social insight a step further by opening a
conversation with customers in that channel. Marketers can use
social networks or online communities to start a dialogue on spe-
cific topics, like launching a new product, and then use customers’
input to design the product, explains Azita Martin, VP of marketing
at customer engagement platform Get Satisfaction. This type of cocre-
ation can positively impact loyalty because customers feel that they’re
involved and being heard.
“Companies underestimate how much consumers care about giving
product feedback,” Martin says. “Loyal customers love to be recognized
and have their own voice on your website and other places. The ability
to respond to it builds amazing brand loyalty.”
Martin explains that it’s possible to build dynamic VoC content, such
as product reviews, right into an online forum or product pages on a
brand’s website. This is a boon to marketers because customers share
detailed opinions in context, which increases their engagement while
creating better informed buyers. She cites as an example Morrison-
owned baby e-commerce store Kiddicare, which saw an 8% drop in cart
abandonment and a 5% increase in search traffic to the website after
taking this approach.
Closing the loop
Marketers must not fall into the trap of listening to only the vocal mi-
nority, says Foresee’s Freed. “The squeaky wheel can get a little bit too
much attention sometimes, and if you ignore the silent majority you
won’t get a truly representative audience,” he says.
To avoid this “extreme bias” in the data, Freed recommends that
marketers focus on gathering VoC insight over time and from across
channels, not just one-off direct feedback. “You need to listen on a con-
tinuous basis and understand how internal and external [factors] can
influence your customers’ expectations,” he says.
Understanding, tracking, and measuring those influencers can be a
great asset to marketers in their loyalty-building VoC efforts—when
they take action on what they learn. Listening without taking action
can be perilous.
Loyalty Takes
Listening
“Loyalty is the biggest revenue
driver for our business.”
Julie Kaplan, Healthy Directions
12_Feature_Loyalty_v8.indd 13 3/12/13 4:23:42 PM
“An area most companies struggle in is responding and reacting to
feedback,” Freed says. “It’s a common complaint among customers that
having spent the time completing a survey, it goes into a void, never to
be heard of again.”
Although paying lip service to listening to customers’ views and failing
to act on them could signifi cantly erode loyalty, not all input requires
action, notes Satrix Solutions’ Klein. However, all feedback should be
acknowledged. “Demonstrating commitment to customers is one of the
most signifi cant aspects of a successful [VoC] program,” he says. “But
one fallacy associated with customer feedback programs is that man-
agement may feel obligated to do everything customers want.”
Klein explains that some customers may express frustration over the
fact that a company’s products or services are too expensive, for exam-
ple, but it might not necessarily be the right business decision
to align with such customer requests. On the
other hand, if marketers are communicat-
ing a specifi c brand promise that their
company’s products or customer ex-
perience aren’t delivering, then either
the brand promise or the products or
experience need to change or customer
loyalty may suffer.
Consequently, VoC shouldn’t be a silo
within marketing, but integrated across
the entire business to ensure the greatest
positive impact on loyalty. “One of the biggest challenges is mind-set,”
McInnes says. “To do [VoC] well it needs to be accepted as part of every
function in the business, not handled by marketing alone.”
Kaplan explains that when Healthy Directions launched its VoC pro-
gram it was a complex undertaking. “The diffi culty was how we went
about installing it in the organization, amid all the ordinary day-to-day
things we have to do.”
As it turns out, convincing the organization of the worth of the VoC
initiative didn’t take long. “We were fortunate that we quickly surfaced
quality insights that we use in our organization every single day,” Kaplan
says. “The VoC program became embedded in the organization very
quickly, with people across the business using its insights.”
It’s clear that setting up a comprehensive VoC program requires time,
commitment, and resources, but with ever-increasing customer expec-
tations, ignoring the voice of the customer is no longer an option for
marketers who are charged with building customer loyalty. “It’s really
all about creating a culture in which understanding customers’ needs is
part of the organizational DNA,” Klein says. “This commitment should
not be underestimated; it offers a tremendous way to differentiate your
business and build loyalty.” ■
14 | April 2013 | dmnews.com
CUSTOMER LOYALTY | Loyalty Marketing Guide 2013
Having a robust listen-
ing system in place to
drive loyalty among its
customers and part-
ners is nothing new
to networking soft-
ware giant Cisco Sys-
tems, which set up its
customer satisfaction
function in 1999. But
it was over a year ago
that the company de-
cided to strengthen its
approach to voice of the customer (VoC)
by creating the Listening Services Center
of Excellence to centralize the various lis-
tening posts from across the business.
“At Cisco all of the employees carry a
badge that has our company values on it.
One of those values, which is part of our
DNA, is customer success,” says Karen E.
Mangia, director of Cisco Systems’ Listen-
ing Services Center of Excellence. “We use
VoC to measure how we’re doing against
that cultural value and make it real to every
single employee in the business.”
The 34-member strong listening center
consists of three teams that are respon-
sible for listening, analyzing, and integrat-
ing VoC learnings back into the business. “I
like to think of them as a group of people
who are so brilliant they could tell a senior
[executive] something about the business
that they don’t know already,” Mangia says.
“To me, it’s not just about saying we have a
program; the real value is it is about what
we can learn from it.”
Easy does it
Mangia explains that Cisco’s listening posts
gather input from customers and part-
ners globally, making it possible to iden-
tify themes. For example, the company
learned that the “ease of doing business”
with Cisco is a loyalty driver. It also learned
through VoC, however, that the business
wasn’t delivering as well as it could in that
area. So Cisco launched a formal action
plan that included everyone across the or-
ganization, including the CEO. It ties spe-
cifi c projects to drivers that impact the
ease of doing business with the company.
It also launched custom online dashboards
that staff can use daily to monitor ease-of-
doing-business results. Executives also re-
ceive a weekly email highlighting customer
comments specifi cally regarding the ease
of doing business with Cisco.
The company has also made a signifi cant
effort in the introduction of its programs
to “close the loop” with customers and
partners about how it’s using their feed-
back. “When we connect back with them,
it builds future loyalty,” Mangia says.
Another initiative that the listening center
led based on VoC input was the streamline
navigation of Cisco’s support website, al-
lowing customers to more quickly access
information and resolve problems. As a
result, 81% of technical support issues are
now resolved online, leading to cost sav-
ings of hundreds of millions annually.
Cisco Listens and Learns
Karen E. Mangia,
Director of Listening
Services Center
of Excellence,
Cisco Systems
“Most companies struggle in
responding to feedback.”
Larry Freed, ForeSee
12_Feature_Loyalty_v8.indd 14 3/12/13 4:24:51 PM
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